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Europe’s biggest banks face restrictions on lending to hedge funds in a key MEP’s proposed amendments to a bank-structure bill now making its way through the legislature.

The draft European Union law, which would stop too-big-to-fail banks from proprietary trading and possibly require them to break up, should also include limits on hedge-fund lending, according to Jakob von Weizsaecker, who represents the European Parliament’s Socialists and Democrats Group in deliberations on the bill.

“The extra restrictions on lending to hedge funds would reinforce the proprietary trading ban,” Mr von Weizsaecker said in a interview. “We don’t want to ban prop trading at banks only to see them leverage hedge funds with debt.”

The European Commission put forward the draft bank-structure law in January 2014, saying it was necessary to tackle a “small number of very large banks which otherwise might still be too-big-to-fail, too-costly-to save, too-complex-to-resolve.”

Under the commission’s blueprint, the legislation would cover banks that have assets exceeding €30bn in three consecutive years and trading activities of more than €70bn or 10% of assets.

It specifically captures the European banks labelled as globally systemic by the Financial Stability Board, including HSBC Holdings and Deutsche Bank.

The commission has said the ban on owning and investing in hedge funds is needed to prevent banks covered by the legislation from circumventing its “narrowly” defined proprietary trading ban, which it has penciled in to take effect on January 1, 2017.

Both measures differ from the US Volcker rule, which caps investment in hedge funds.

The draft law requires approval from national governments and the European Parliament to take effect.